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Well, you need to think again 🧵⬇️

Yes, Bitcoin can do smart contracts

DLCs (Discreet Log Contracts) are an innovative way to execute financial contracts using Bitcoin’s own script - no need for swaps, wraps or other coins that just involve security risks and major trust issues

Just plain Bitcoin

Historically, Bitcoin wasn’t seen as suitable for complex financial contracts due to its limited scripting capabilities

However, Thadeus Dryja introduced DLCs, enabling secure, bitcoin-native contracts: Financial sovereignty intact and private keys secured

https://adiabat.github.io/dlc.pdf

How do DLCs work?

They utilize a setup where contracts between two parties (like Alice and Bob in a bet) are secured by Bitcoin multisig and involve oracles only when necessary for enforcing contract terms

DLCs keep your transactions discreet & secure.

The contract mechanics and value exchange stay off-chain, except the actual transaction results.

No compromises on privacy!

An external observer would not be able to distinguish a transaction resulting from a DLC

🔐 How DLCs Operate: The Technical Stint

Contracts outline possible outcomes, each with corresponding transaction setups (CETs) that are kept off-chain.

The contract has an expiry date, an can be closed collaboratively.

Oracles in DLCs act as trust-solidifiers not holders.

They feed verified external data needed for contract enforcements in the particular case of a non-collaborative closure.

However, DLCs are not without challenges.

The reliance on oracles introduces a layer of risk. To mitigate this, DLCs can incorporate multiple oracles to cross-verify data, thereby enhancing reliability.

Secure from the outset:

In the case of a non-collaborative close, and if Oracles don’t respond, aggrieved party can always request forced closure of the contract.

Both parties will recover their initial capital, at the end of a timelock thanks to a refund transaction

DLCs limit MEV (miner extractable value) opportunities by keeping contract specifics off-chain until completion.

This is a crucial feature to ensure fair contract execution.

Benefits of DLCs include reduced blockchain congestion as these contracts minimize the data recorded on-chain.

This not only preserves users’ privacy but also optimizes transaction capacity.

10101 uses DLC Channels, a novel #Bitcoin layer 2 based on the fundamentals of DLCs and sharing some of the properties of Lightning channels.

Trading on 10101 ensures secure and discreet experience, while preserving your financial sovereignty.

Once your DLC Channel is open, you can trade #Bitcoin derivatives with no on-chain footprint, and without giving up the custody of your funds to a platform.

Resulting in an unrivalled, low-cost, private, safe experience.

BY THE WAY!

We charge NO fees for trading #Bitcoin perpetuals up to halving, and we share half the cost of opening a channel with you!

Download and try our app now: https://10101.finance